How to create a financial forecast for a business support services company?
Developing and maintaining an up-to-date financial forecast for your business support services company is key in order to maintain visibility on your business’s future cash flows.
If you feel overwhelmed at the thought of putting together a business support services company financial forecast then don’t worry as this guide is here to help you.
We'll cover everything from: the main objectives of a financial forecast, the data you need to gather before starting, to the tables that compose it, and the tools that will help you create and maintain your forecast efficiently.
Let's get started!
Why create and maintain a financial forecast for a business support services company?
In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your business support services company becomes handy.
Creating a business support services company financial forecast forces you to take stock of where your business stands and where you want it to go.
Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your business support services company.
Having this clear plan in place will give you the confidence needed to move forward with your business’s development.
Having an up-to-date financial forecast for a business support services company is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall.
Finally, your business support services company's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your business.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
What information is needed to build a business support services company financial forecast?
The quality of your inputs is key when it comes to financial modelling: no matter how good the model is, if your inputs are off, so will the forecast.
If you are building a financial plan to start a business support services company, you will need to have done your market research and have a clear picture of your sales and marketing strategies so that you can project revenues with confidence.
You will also need to have a clear idea of what resources will be required to operate the business support services company on a daily basis, and to have done your research with regard to the equipment needed to launch your venture (see further down this guide).
If you are creating a financial forecast of an existing business support services company, things are usually simpler as you will be able to use your historical accounting data as a budgeting base, and complement that with your team’s view on what lies ahead for the years to come.
Let's now zoom in on what will go in your business support services company's financial forecast.
The sales forecast for a business support services company
The sales forecast, also called topline projection, is normally where you will start when building your business support services company financial forecast.
Creating a coherent sales projection boils down to estimating two key drivers:
- The average price
- The number of monthly transactions
To do this, you will need to rely on historical data (for an existing business), market research data (for both new and existing business support services companies), and consider the elements below:
- Economic conditions: The overall economic conditions in the country or region can greatly impact your business's average price or number of monthly transactions. In times of economic downturn, businesses may cut back on their spending for support services, resulting in a decrease in your average price and number of transactions.
- Industry trends: Keeping up with the latest trends in the industry is crucial for your business support services company. Changes in technology, regulations, or customer demands can affect your average price and number of monthly transactions. For example, if there is a shift towards more use of online support services, your average price may decrease due to increased competition.
- Competition: The level of competition in your industry can impact your average price and number of monthly transactions. If there are new competitors entering the market or existing competitors lowering their prices, you may need to adjust your prices in order to remain competitive, which can affect your average price and number of transactions.
- Customer retention: Retaining your existing customers is crucial for the success of your business support services company. If you are unable to retain your customers, you will need to constantly find new ones, which can result in fluctuations in your average price and number of monthly transactions.
- Technology advancements: Rapid advancements in technology can greatly impact your business's average price and number of monthly transactions. For example, if there is a new software or tool that can automate certain support services, it may decrease your average price but increase the number of monthly transactions as you are able to serve more clients in a shorter amount of time.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The operating expenses for a business support services company
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your business support services company on a daily basis.
Expenses normally vary based on how much revenue you anticipate (which is why, from experience, it is always better to start your forecast with the topline projection), and where your business is based.
Operating expenses for a business support services company will include some of the following items:
- Staff costs: This includes salaries, wages, benefits, and any other expenses related to hiring and managing employees. As a business support services company, your staff will be your most valuable asset, so it's important to budget for their compensation and any associated costs.
- Accountancy fees: You may need to hire an accountant to help with bookkeeping, tax preparation, and financial management. These services will come at a cost, so be sure to budget for them in your operating expenses.
- Insurance costs: As a business support services company, you will likely need to have several types of insurance, including professional liability insurance, general liability insurance, and workers' compensation insurance. These costs can add up, so make sure to include them in your forecast.
- Software licenses: In order to provide efficient and effective support services, you will need to invest in software licenses for various tools and platforms. These can include project management software, communication tools, and accounting software.
- Banking fees: As you grow your business, you will likely have multiple bank accounts and may incur fees for services such as wire transfers, overdraft protection, and cash management. Be sure to factor in these fees when creating your forecast.
- Marketing and advertising: To attract new clients, you will need to invest in marketing and advertising efforts. This can include creating a website, attending networking events, and running targeted ads. These costs should be included in your operating expenses.
- Rent and utilities: If you have a physical office space, you will need to budget for rent and utilities such as electricity, water, and internet. If you work from home, be sure to include a portion of your household expenses in your forecast.
- Office supplies: From paper and pens to printer ink and postage, there are many small but necessary expenses that fall under the category of office supplies. Make sure to budget for these items in your operating expenses.
- Professional development: As a business support services company, it's important to stay up-to-date with industry trends and skills. This may require investing in professional development courses, conferences, and certifications.
- Travel expenses: Depending on the type of support services you offer, you may need to travel to meet with clients or attend industry events. Be sure to budget for transportation, lodging, and meals when creating your forecast.
- Legal fees: As with any business, there may be legal fees associated with contracts, agreements, and other legal matters. Be sure to include these costs in your operating expenses.
- Taxes: As a business owner, you will be responsible for paying taxes on your company's profits. It's important to budget for these expenses to avoid any surprises come tax season.
- Telephone and internet: As a business support services company, you will likely rely heavily on phone and internet services to communicate with clients and manage projects. Be sure to include these costs in your forecast.
- Training and onboarding: When you hire new employees, you will need to invest time and resources into training and onboarding them. This may include creating training materials, conducting orientation sessions, and providing ongoing support.
- Office equipment maintenance: If you have office equipment such as computers, printers, and phones, you will need to budget for regular maintenance and repairs. This will help ensure that your business operations run smoothly and efficiently.
This list will need to be tailored to the specificities of your business support services company, but should offer a good starting point for your budget.
What investments are needed to start or grow a business support services company?
Your business support services company financial forecast will also need to include the capital expenditures (aka investments in plain English) and initial working capital items required for the creation or development of your business.
For a business support services company, these could include:
- Your company's office space: This includes renting or purchasing a physical location for your business, as well as any necessary renovations or upgrades to the space.
- Equipment and technology: This can include computers, printers, software, and other necessary tools for your employees to perform their job duties efficiently.
- Furniture: This includes desks, chairs, and other office furniture needed for your employees to work comfortably.
- Vehicles: If your company requires employees to travel for work, you may need to purchase or lease vehicles for them to use.
- Office supplies: This includes items such as paper, ink, and other supplies needed for day-to-day operations of your business.
Again, this list will need to be adjusted according to the size and ambitions of your business support services company.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The financing plan of your business support services company
The next step in the creation of your financial forecast for your business support services company is to think about how you might finance your business.
You will have to assess how much capital will come from shareholders (equity) and how much can be secured through banks.
Bank loans will have to be modelled so that you can separate the interest expenses from the repayments of principal, and include all this data in your forecast.
Issuing share capital and obtaining a bank loan are two of the most common ways that entrepreneurs finance their businesses.
What tables compose the financial plan for a business support services company?
Now let's have a look at the main output tables of your business support services company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your business support services company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a business support services company should normally show:
- Sales growing above inflation
- Stable or expanding (ideally) profit margins
- A net profit
This will of course depend on the stage of your business: a new venture might be loss-making until it reaches its breakeven point in year 2 or 3, for example.
The projected balance sheet
Your business support services company's projected balance sheet provides a snapshot of your business’s financial position at year-end.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business possesses including cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. They include accounts payable (money owed to suppliers), taxes payable and loans from banks and financial institutions.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits and losses generated by the business to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.
The cash flow forecast
Your business support services company's cash flow forecast shows how much cash your business is expected to consume or generate in the years to come.
It is best practice to organise the cash flow forecast by nature to better explain where cash is used or generated by the business support services company:
- Operating cash flow: shows how much cash is generated by the operating activities
- Investing cash flow: shows how much will be invested in capital expenditure to maintain or expand the business
- Financing cash flow: shows if the business is raising new capital or repaying financiers (debt repayment, dividends)
Keeping an eye on (and regularly updating) your business support services company's cash flow forecast is key to ensuring that your business has sufficient liquidity to operate normally and to detect financing requirements as early as possible.
If you are trying to raise capital, you will normally be asked to provide a monthly cash flow forecast in your business support services company's financial plan - so that banks or investors can assess seasonal variation and ensure your business is appropriately capitalised.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Which tool should you use to create your business support services company's financial projections?
Building a business support services company financial forecast is not difficult provided that you use the right tool for the job. Let’s see what options are available below.
Using online financial projection software to build your business support services company's forecast
The modern and easiest way to build a forecast is to use professional financial projection software such as the one we offer at The Business Plan Shop.
There are several advantages to using specialised software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast, and recalibrate your forecast as the year goes by
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
- It’s cost-efficient and much cheaper than using an accountant or consultant (see below)
If you are interested in this type of solution, you can try our forecasting software for free by signing up here.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional business support services company financial projection.
As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.
The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.
If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).
Why not use a spreadsheet such as Excel or Google Sheets to build your business support services company's financial forecast?
Creating an accurate and error-free business support services company financial forecast with a spreadsheet is very technical and requires a deep knowledge of accounting and an understanding of financial modelling.
Very few business owners are financially savvy enough to be able to build a forecast themselves on Excel without making mistakes.
Lenders and investors know this, which is why forecasts created on Excel by the business owner are often frowned upon.
Having numbers one can trust is key when it comes to financial forecasting and to that end using software is much safer.
Using financial forecasting software is also faster than using a spreadsheet, and, with the rise of artificial intelligence, software is also becoming smarter at helping us analyse the numbers to make smarter decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and keeping your projections up to date as the year progresses is manual, tedious, and error-prone. Whereas financial projection software like The Business Plan Shop is built for this.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Use our financial projection templates for inspiration
The Business Plan Shop has dozens of financial forecasting templates available.
Our examples contain both the financial forecast, and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own business support services company, looking at our template is always a good way to get ideas on how to model financial items and what to write when creating a business plan to secure funding.
Takeaways
- A financial projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
- Using financial forecasting software makes it easy to create and maintain up-to-date projections for your business support services company.
You have reached the end of our guide. We hope you now have a better understanding of how to create a financial forecast for a business support services company. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Also on The Business Plan Shop
- Example of financial projections
- How to project revenues for a business?
- Example of financial forecast for business idea
Know someone who runs or wants to start a business support services company? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
